Quick Q&A: Jesse Mendelsohn on the 340B pilot testing rebates

A voluntary pilot from the Health Resources and Services Administration will change how some 340B discounts are delivered starting Jan. 1, 2027. Under the rebate model, hospitals and other 340B-eligible entities will pay the wholesale acquisition cost for certain drugs and then submit claims to receive rebates reflecting the 340B ceiling price, rather than getting the discount up front. The pilot is limited to drugs whose maximum fair prices have been negotiated by Medicare under the Inflation Reduction Act (IRA), a list of 21 drugs at launch that will grow by 15 drugs on Jan. 1, 2028.

Jesse Mendelsohn, a senior vice president at Model N, a revenue optimization and compliance provider for life sciences and high-tech manufacturers, explained that manufacturers of the selected products can opt in to honor the 340B price through a rebate instead of an upfront discount.

A key reason for the pilot, according to Mendelsohn, is language in the IRA that governs the Medicare drug price negotiations. The law states that manufacturers do not need to duplicate discounts, he said, and that is what happens if 340B discounts are applied to drugs with maximum fair prices under the IRA.

Manufacturers argued that they could not carry out that provision without a rebate, Mendelsohn said, because they had no way to get a record of the 340B dispensing event and a record of the Medicare dispensing event at roughly the same time and show that only one discount applied. "That was a convincing argument," he said.